Yet Another International Enters the Marcellus

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Rex Energy recently announced that they have entered into a joint venture with Summit Discovery Resources II, LLC which is a wholly owned subsidiary of Japan’s Sumitomo Corporation.  According to the agreement Rex will let go of 12,900 net acres, certain Marcellus producing wells, and associated mid-stream assets for approximately $140.4 million.  The details of the payment are that Sumitomo will pay roughly $88.4 million in cash and $52.0 million in drilling carry where Sumitomo will fund 80% of Rex’s drilling and completion costs until the $52.0 million is spent.

“We are extremely pleased to announce this joint venture and look forward to our partnership with Sumitomo,” states Benjamin W. Hulburt, Rex’s President and CEO. “Upon closing this deal, we will once again be debt free with substantial cash on hand.  We believe that this will enable us to continue to aggressively develop our assets, which maintaining one of the cleanest balance sheets in the industry.  With approximately 91% of our capital being invested in oil and liquids rich gas assets, combined with our debt free balance sheet, we strongly believe we are very well positioned to prosper in the current commodity price environment.”

A quick break down of the deal is as follows:

Butler County, PA – Rex will sell a 15% non-operated interest in 41,100 net acres for $61.6 million (or $10,000/acre), 30% interest in 20 Marcellus wells for approximately $19.1 million, and 30% interest in midstream assets for $3.9 million.

Rex/Williams JV Areas – Rex will sell 20% interest of roughly 22,100 net acres for $35.9 million (or $8,115/acre), 20% interest in 19 Marcellus wells for $5.7 million and JV midstream assets for approximately $822,000.

Additional Marcellus Areas – Rex will sell 50% interest in roughly 4,600 net acres in Fayette and Centre Counties for $18.5 million (or $8,115/acre).

As a result of this new agreement Rex has increased their borrowing base from $100.0 million to $125.0 million and has also updated their midyear reserve increasing their proved reserves approximately 41%, compared to the end of last year, to roughly 177.0 Bcfe.

To learn more visit the Marcellus Acquisition and Divestitures folder in the Unconventional Updates in DI’s DNA.

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